Export-Import

Last updated: Wednesday, December 19, 2018

Output Increases, Market Is Favourable

Posted: Monday, July 16, 2018

Vietnam is still the world's second largest coffee producer only to Brazil. According to estimates by the US Department of Agriculture (USDA), Vietnam's 2017 - 2018 coffee output will reach 29.3 million bags, the highest level in the last four crop years.

Forecasts of increased supply

In particular, robusta production is estimated at 28 million bags and arabica 1.3 million bags. Vietnam will become the largest robusta producer in the world and the world's 11th largest arabica producer. At present, the weather in the Central Highlands is very favourable for the coffee development, with the average rainfall. In terms of supply, Vietnam's coffee production is forecast to increase by 600,000 bags to a record 29.9 million bags in 2018-2019. In particular, robusta output is estimated at 28.5 million bags and arabica output is estimated at 1.4 million bags. The weather is cooler and the rain came just before the flowering time, which has helped coffee grow more favourably.

Although domestic coffee prices are falling deeply, producers still have enough money to buy raw materials for this year thanks to the big win last year. The coffee area is expected to grow slightly over last year, with nearly 95 per cent of the area being still robusta. However, Mr Nguyen Viet Vinh, General Secretary of the Vietnam Coffee and Cocoa Association, said, "It’s still too early to make a forecast for the 2018 - 2019, but the weather is very supportive of the current coffee crop."

"Buying and selling are still slow because farmers do not want to sell at prices below VND37,000/kg," a trader in Dak Lak said. According to traders, domestic supply in Vietnam is quite limited because the harvest last year was not as expected. "At present, farmers have only 10 per cent of coffee output in the 2017-2018 season. Meanwhile, companies now export nearly two-thirds of coffee stocks; the rest will continue to sell when the prices get higher,” said Mr Phan Xuan Thang, Vice President of the Vietnam Coffee Association.

Consumption increased

In the domestic market, coffee consumption may reach a record of 2.88 million bags in 2017-2018. End-of-period inventories will fall to about one million bags, according to USDA estimates. In terms of exports, the USDA forecasts that Vietnam will export 27.65 million bags in 2017 - 2018, an increase of 100,000 bags over the previous crop. According to the General Department of Customs, Vietnam's coffee exports continuously decreased in April and May in terms of volume. In the first half of June, the export volume reached 81,974 tonnes. From the beginning of the year to the first half of June, Vietnam exported 959,505 tonnes of coffee, up 10.3 percent over the same period last year. However, the value of coffee exports reached US$1.85 billion in mid-June, down 5.2 percent from the same period last year due to low coffee and domestic prices.

Price

In the first half of this year, domestic coffee prices tended to fall. Compared with the end of 2017, the price of coffee in the Central Highlands provinces decreased VND1,100 - 1,200/kg. Coffee prices fell due to excess supply pressure on the global coffee market. In April, the coffee market increased by VND500/kg compared to the end of the first quarter due to the world market trend. The price of coffee increased because Vietnamese coffee growers tend to hold the goods. However, in May, coffee prices fell to the lowest price in nearly two months. Vietnamese coffee growers were not ready to sell coffee at current prices.

In terms of domestic consumption, Vietnam is forecasted to continue to increase coffee consumption to a record of 2.99 million bags in 2018 - 2019. In terms of exports, Vietnam is forecast to sell to the market 27.9 million bags, the highest level since the 2016-2017 season. Of which, coffee exports increased by 200,000 bags to 25.2 million bags. End-of-period inventories rose by around 1.2 million bags due to the large supply. In terms of price, in the long term, coffee prices may recover to VND38,000 - 42,000/ kg, said Phan Xuan Thang, Vice President of the Vietnam Coffee Association. Agriculture expert Hoang Trong Thuy also said that in the third week of July, coffee prices may begin to rise again. The reason is that demand for coffee in the summer season from summer to autumn is high. Besides, Vietnam's coffee price is often lower than that of Brazil, so it can also be considered a stimulus for domestic demand.